NORTHWESTERN CORPORATION KEY EMPLOYEE SEVERANCE PLAN _______________________________ Effective October 19, 2016 _______________________________

Eligibility for Severance Benefits    3

Severance Benefits    3

ADDITIONAL PROVISIONS    5

Ineligibility for Severance Benefits    5

Re‑employment    5

Taxes    5

Relation to Other Plans    5

Amendment or Termination    5

SUPERIOR PLAN PROVISIONS    5

Surviving Plan    6

ADMINISTRATIVE PROVISIONS    6

General    6

Costs and Indemnification    7

Limitation on Employee Rights    7

Governing Law    7

Miscellaneous    7

ERISA Rights    7

Claims Procedures    9

“Administrator” shall mean NorthWestern Corporation or certain officer or officers of the Company as designated by the Board.

“Annual Incentive Bonus” shall mean, with respect to an Eligible Employee, the target incentive level (which assumes achievement of 100% of target for each performance measure) for the Eligible Employee under the Company’s annual incentive plan in effect on the date of termination of employment.

“Board” shall mean the Board of Directors of NorthWestern Corporation. The Board may delegate its power or duty over this Plan to any other person or persons, including a committee or sub-committee of the Board.

“Cause” under the provisions of this Plan shall mean any of the following:

Fraud, misappropriation of corporate property or funds, or embezzlement;

Malfeasance in office, misfeasance in office which is willful or grossly negligent, or nonfeasance in office which is willful or grossly negligent;

Failure to comply with the Company’s Code of Conduct and Ethics;

Illegal conduct, gross misconduct or dishonesty, in each case which is willful and results (or is reasonably likely to result) in substantial damage to the company; or

Willful and continued failure by the employee to perform substantially his/her duties with the Company (other than any such failure resulting from his/her incapacity due to physical or mental illness) after receiving written demand for substantial performance from his/her immediate supervisor and after having been provided a reasonable period to correct the same. The written demand will specifically identify the manner in which such immediate supervisor believes the employee has not substantially performed his/her duties.

“Company” shall mean NorthWestern Corporation and all of its affiliates, and any entity, which is a successor in interest to the Company.

“Disability” shall mean that an Eligible Employee is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident or health plan covering employees of the Eligible Employee’s employer.

“Eligible Employee” shall mean an Eligible Executive or an Eligible Officer.

“Eligible Executive” shall mean any individual who has been appointed by the Board as an executive officer of the Company for the purpose of Section 16 of the Securities Exchange Act of 1934, and who is not otherwise ineligible to receive Severance Benefits based on a provision in an employment agreement with the Company or under Section 3.1 of this Plan.

“Eligible Officer” shall mean any individual who has been appointed by the Board as an “Officer” of the Company, but who is not an Eligible Executive, and who is not otherwise ineligible to receive Severance Benefits based on a provision in an employment agreement with the Company or under Section 3.1 of this Plan.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, together with regulations thereunder.

“Plan” shall mean this NorthWestern Corporation Key Employee Severance Plan.

“Retirement” shall mean the same definition provided under the Company sponsored pension /retirement plan in which each Eligible Employee participates.

“Severance Benefits” shall mean those benefits provided to an Eligible Employee pursuant to Section 2.2 of the Plan.

“Successor Employer” shall mean an employer that either (a) acquires assets, stock or operations from the Company, either directly or indirectly, and continues the existing operation in whole or in part, or (b) continues any portion of an operation of the Company immediately following the termination of such operation by the Company.

If such Eligible Employee is an Eligible Executive,

a lump sum cash severance payment in an amount equal to two times the sum of the Eligible Executive’s (a) annual base pay in effect on the date of termination of employment, and (b) Annual Incentive Bonus. The Company may pay such lump sum cash severance payment within the Company’s next payroll cycle following the date of termination of employment, but must make the payment no later than 30 days from the date of termination of employment;

a lump sum annual incentive payment in an amount equal to the Eligible Executive’s cash payment under the Company’s annual incentive plan in effect on the date of termination of employment (a) calculated in accordance with the terms of the annual incentive plan through the last month in the Company’s fiscal year that was completed prior to the Eligible Executive’s date of termination of employment, and (b) prorated by the number of months in the Company’s fiscal year that have been completed, excluding the month in which the Eligible Executive’s date of termination of employment occurs. If the Company is unable to calculate any performance measure from such annual incentive plan, the Company shall deem such performance measure to have achieved 100% of target for purposes of determining the lump sum annual incentive payment. The Company may pay such lump sum annual incentive payment within the Company’s next payroll cycle following the date of termination of employment, but must make the payment no later than 30 days from the date of termination of employment;

reimbursement of any premiums paid by an Eligible Executive for COBRA coverage for 24 months following such Eligible Executive’s termination of employment. Notwithstanding the foregoing, an Eligible Executive shall no longer be entitled to reimbursement of COBRA premiums under this Section 2.2.1 if such Eligible Executive becomes eligible for medical coverage under another employer’s group medical plans; and

outplacement services provided by a Company selected provider limited to $12,000 over a period not to exceed 12 months following the date employment is terminated.

If such Eligible Employee is an Eligible Officer,

a lump sum cash severance payment in an amount equal to the Eligible Employee’s annual base pay in effect on the date of termination of employment. Such lump sum cash severance payment may be paid within the Company’s next payroll cycle following the date of termination of employment, but in no event later than 30 days from the date of termination of employment;

reimbursement of any premiums paid by an Eligible Officer for COBRA coverage for 12 months following such Eligible Officer’s termination of employment. Notwithstanding the foregoing, an Eligible Officer shall no longer be entitled to reimbursement of COBRA premiums under this Section 2.2.2 if such Eligible Officer becomes eligible for medical coverage under another employer’s group medical plans; and

outplacement services provided by a Company selected provider limited to $12,000 over a period not to exceed 12 months following the date employment is terminated.

Discretion. The Administrator is responsible for the general administration and management of the Plan and shall have all powers and duties necessary to fulfill its responsibilities, including, but not limited to, the discretion to interpret and apply the Plan and to determine all questions relating to eligibility for benefits. The Administrator shall have the discretion to interpret or construe ambiguous, unclear or implied (but omitted) terms as it deems appropriate in its sole discretion. The validity of any such interpretation, construction, decision or finding of fact shall not be given de novo review if challenged in court, by arbitration, or in any other forum, and shall be upheld unless clearly arbitrary or capricious.

Finality of Determinations. All actions taken and all determinations made in good faith by the Administrator will be final and binding on all persons claiming any interest in or under the Plan. To the extent the Administrator has been granted discretionary authority under the Plan, the Administrator’s prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter.

Drafting Errors. If, due to errors in drafting, any Plan provision does not accurately reflect its intended meaning, as demonstrated by consistent interpretations or other evidence of intent, or as determined by the Administrator in its sole discretion, the provision shall be considered ambiguous and shall be interpreted by the Administrator in a fashion consistent with the evidenced intent.

Plan Modification, Amendment, and Termination. The Administrator has the right to amend or terminate the Plan only in accordance with Section 3.5 and 5.7.5.

Your Rights under ERISA. As an Eligible Employee in the Plan, you are entitled to certain rights and protections under ERISA. Your rights include the following:

Right to Examine Plan Documents. You have the right to examine all plan documents. The Administrator will tell you where the plan documents are available for examination. There will be no charge for examining plan documents.

Right to Obtain Copies of Plan Documents. You have the right to obtain copies of all plan documents. You should make your request in writing to the Administrator. There may be a reasonable charge for the copies.

Right to Written Explanation of Denial. If your claim for benefits under the plan is denied in whole or in part, you must be given a written explanation of the reason for denial.

Right to Review. You have the right to request a review and reconsideration of any denial of your claim for plan benefits.

Other ERISA Rights. You can protect your rights under ERISA. For example, ERISA gives you the right to file suit in a state or federal court if your claim for benefits under the plan is denied or ignored. You also can file suit in a federal court if you request plan documents and do not receive them within thirty (30) days. In such a case, the court will require the Administrator to give you the plan documents you requested. In some cases, the court could also require the Administrator to pay you up to $110 a day until you receive the requested materials.

Claims Normally Not Required. Normally, you do not need to present a formal claim to receive benefits payable under this Plan.

Disputes. If any person (Claimant) believes that benefits are being denied improperly, that the Plan is not being operated properly, that fiduciaries of the Plan have breached their duties, or that the Claimant's legal rights are being violated with respect to the Plan, the Claimant must file a formal claim with the Administrator. This requirement applies to all claims that any Claimant has with respect to the Plan, including claims against fiduciaries and former fiduciaries, except to the extent the Administrator determines, in its sole discretion, that it does not have the power to grant all relief reasonably being sought by the Claimant.

Time for Filing Claims. A formal claim must be filed within 90 days after the date the Claimant first knew or should have known of the facts on which the claim is based, unless the Administrator in writing consents otherwise.

Arbitration. The Eligible Employees and Company agree that any and all disputes, controversies or claims of any kind or nature, including but not limited to any arising out of or in any related to the interpretation of this Plan or to the employment or separation of an Eligible Employee from the Company that have not been resolved by the Company within 90 days of the filing of a formal claim by the Eligible Employee under Section 5.7.3, shall be submitted to binding arbitration under the auspices and rules of the American Arbitration Association located nearest to where the Eligible Employee resides. Judgment upon an award rendered by the arbitrator may be entered in any competent court having jurisdiction over the dispute. The Eligible Employees and Company agree that arbitration is in lieu of any and all other civil legal proceedings and that all rights to resolve disputes through court or trial by jury are hereby waived. Furthermore, the Company agrees that it will reimburse an Eligible Employee for any legal costs arising from an Arbitration proceeding that results in a favorable outcome for such Eligible Employee.

Procedures. The Administrator has adopted the procedures for considering and adjudicating claims, which it may amend from time to time, as it sees fit. These procedures shall comply with all applicable legal requirements. The right to receive benefits under this Plan is contingent on a Claimant using the prescribed claims procedures to resolve any claim. Therefore, if a Claimant (or his or her successor or assign) seeks to resolve any claim by any means other than the prescribed claims provisions, he or she must repay all benefits received under this Plan and shall not be entitled to any further Plan benefits.